Fianna Fáil has accused Finance Minister Michael Noonan of "playing fast and loose with the truth" in a major escalation in the row over mortgages.

The political agreement struck between the two main parties has already come under strain, after Mr Noonan blamed Fianna Fáil's decision to push through a bill on variable rates for a drop in bank share prices.

Mr Noonan says the publication of the bill, which grants fresh powers to the Central Bank, resulted in a scenario where "Irish bank shares went down by 10pc across the line".

But Fianna Fáil's finance spokesperson Michael McGrath rejected the claims, which he described as "disingenuous".

He said that PTSB had published a trading report during this period which was followed by the fall in share prices.

However, banking analysts also warned that legislation to force down high variable mortgage rates will stop new entrants coming into the market.